FTSE oil and gas giant Harbour Energy (LSE: HBR) is a standout income share in my portfolio aimed at making retirement much more comfortable.
Moreover, the consensus among analysts is that exceptional earnings growth will support this high dividend yield. It may also drive major gains in the share price over time.
So, how much could I make from the shares over time?
How much earnings growth?
The consensus projection is that Harbour’s earnings will grow a stellar average of 77% a year to end-2028.
A risk here is any prolonged bearish trend in the global oil and gas markets. However, the firm’s September 2024 acquisition of energy giant Wintershall Dea looks transformative in this respect.
Harbour’s full‑year 2024 results, published on 6 March 2025, showed revenue soaring 68% year on year to $6.2bn (£4.6bn). Earnings before interest, taxes, depreciation, depletion, amortisation and exploration expenses (EBITDAX) surged 48% to $4bn.
This momentum carried into its H1 2025 update, with revenue rocketing 179% to $5.3bn, and EBITDAX climbing 219% to $3.9bn.
What sort of price rise?
Earnings growth is reflected in the discounted cash flow valuation method. This projects future cash flows and then discounts them back to today to identify where any share should trade.
Analysts’ DCF models vary — some more conservative than mine — depending on the assumptions used.
However, based on my DCF modelling — including an 8.5% discount rate — Harbour Energy shares look 37% undervalued at their current £2.26 price.
Consequently, their ‘fair value’ is around £3.59. And this matters for long-term investors, as share prices can converge towards fair value over time.
What about the dividend income?
In 2024, Harbour paid a dividend of 26 cents per share, fixed at a sterling equivalent of 20.2p. This gives a current dividend yield of 8.9%. Analysts expect the yield to remain around this level until at least 2028.
So, my £20,000 holding in the firm would generate £28,543 in dividends after 10 years and £265,968 after 30 years.
As a long-term investor, I regard 30 years as a standard investment cycle. It begins with first investments around 20 and ends in early retirement options around 50.
The dividend figures reflect an average 8.9% yield, although this could go down, up, or stay the same. They also assume dividends are reinvested to harness the power of ‘dividend compounding’.
By the end of the 30 years, the value of my Harbour Energy holding (including the original £20,000) would be £285,968.
And that would pay me a yearly income from dividends of £25,451! But of course, nobody can predict how such companies will be faring in 30 years’ time.
My investment view
I believe Harbour Energy offers a rare combination of high income, deep value, and powerful earnings momentum. It is the sort of stock I want when looking to build long-term wealth.
The dividend yield alone is attractive enough for me to hold it. But what really strengthens its investment case is the potential for a major valuation re-rating. And underpinning both is extremely strong forecast earnings growth.
With Harbour shares trading well below my estimate of fair value and the dividend yield expected to remain high, I will buy more soon. I also think they are well worth the attention of other investors.
